Health Insurance and Mediclaim – what are the differences?

There has been a slew of Health Insurance products launched by life-insurance companies over the last few months. LIC's Health Plus, ICICI's Hospital Care, Reliance Life's Health N Wealth and Max New York Life's Medicash are some of the health insurance products launched recently.
Before the launch of these health insurance products, there was only one health insurance product in the market called "Medi-claim" issued by the PSU non-life insurance companies like National Insurance, New India Assurance.
With the availability of both "health insurance" covers from Life Insurance companies and the "Mediclaim" from the non-life insurance companies, there is a possibility that we all tend to believe that both the products are one and the same. It is not the case.

This article is to provide more clarity on the differences between these products and help the customer choose the most appropriate one.

Essentially, the differences between "Health Insurance" (Life Insurance companies products) and the "Mediclaim" (non-life insurance companies products) are as follows:
1. Mediclaim policies issued by non-life insurance companies would compensate only for the expense actually incurred, whereas life-insurance companies would give you the lump-sum amount specified in the policy irrespective of your actual spend. However, the ceiling in respect of life-insurance companies' products should be kept in mind.
2. Non-life insurance policies are one-year policies, similar to your vehicle insurance, whereas life-insurance companies' schemes are long term policies. Mediclaim policies needs to be renewed on a yearly basis and it is a possibility that the insurer may not accept renewal due to adverse health condition or claim history.
3. Non-life insurance companies schemes have no provision for daily cash expenses as offered by the life-insurance companies schemes.
4. Non-life schemes cover most forms of hospitalisation, whereas lump sum benefit under the life insurance companies schemes are normally meant only for a specified list of diseases/surgeries. In case of LIC 's Health Plus, it covers a set of 50 dreaded diseases or surgeries. Outside these 50 diseases/surgeries, if somebody gets admitted for hospitalisation, LIC would be liable to cover the medical expenses . They will pay you only the Hospitalisation cash benefits.
5. Life-insurance companies schemes comes bundled with investment options (unit linked plans) whereas non-life insurance would never have investment options. The investment risk in unit linked products are to be borne by the buyer of the health insurance, as in any other ULIP product.

Which one to opt for?
The ideal solution is to have both the "Mediclaim" and "Health Insurance" policies. Since the Health Insurance policies provide for a lump sum payment if an insured is diagonised or treated for any of the listed diseases, it would act as an effective supplement to the mediclaim policy.